Russia sees Greek debt 'restructuring': minister

19th June 2010, Comments 0 comments

Russia on Saturday bluntly dissented from Europe's insistence that Greece should avoid default, saying the country will require a restructuring of debts by creditors.

Finance Minister Alexei Kudrin said such a move would be acceptable for the market and insisted it would be wrong to describe the restructuring as a full-scale default by the embattled government in Athens.

"I would allow for a restructuring of Greece's debt, which will be unpleasant," Kudrin told a session of the annual Saint Petersburg economic forum.

"You could call it a mini-default, but I would not say it is a default in the full sense of the word. It will be something more complicated," he said.

"It will not be a deep restructuring, it will be acceptable for the market," he said, adding that expectations for the restructuring were already priced into the market.

His comments came two days after an EU-IMF team carrying out a health check on Greece's finances said it had found that its reform programme "is on track and that policies are being implemented as agreed."

Moody's earlier this week slashed its assessment of Greek creditworthiness by four notches, from A3 to Ba1, a move described by the European Union's top economic commissioner Olli Rehn as "surprising and highly unfortunate".

The European Union and the International Monetary Fund have extended Greece a 110-billion-euro (136-billion-dollar) bailout package in a bid to restore investor confidence in the country and the eurozone as a whole.

French Finance Minister Christine Lagarde conspicuously failed to echo Kudrin's comments, saying the EU-IMF package for Greece was not dependent on any kind of "haircut" on its debts.

The Greek government "is beginning to reform and change deeply the Greek economy," she said, speaking at the same meeting. "So to me, at least, that is what matters."

IMF first deputy managing director John Lipsky described the Greek reform programme as "path-breaking" and said it is "so far looking on track."

However, Russia's Kudrin, known at home as a fiscal hawk, added: "I believe in Europe and the euro."

Kudrin said that at times of economic crisis demand should be supported with short-term measures, rather than long-term packages. "When the economy grows, more attention should be paid to the fiscal-debt situation," he said.

Greece's budgetary woes sparked a major financial crisis for the 16 nations using the euro, prompting a plunge in the value of the euro and even questions over whether the future of the single European currency is secure.

The Russian economy went into near meltdown in 1998 when it defaulted on sovereign debt in the wake of the Asian financial crisis, but reserve funds built up since then allowed it to recover from the current financial crisis.

David Riley, group managing director for ratings agency Fitch, said it was "self-evident" that Greece was currently the number one credit risk worldwide.

He earmarked Britain as the other major global credit concern as it has "an unsustainable budgetary position". He also said Spain was being challenged, though due to a boom in private credit before the crisis rather than bad policies.

Russia meanwhile had "learned lessons through bitter experience" in past crises, he said.

Lipsky meanwhile denied that a visit by IMF managing director Dominique Strauss-Kahn to Spain was aimed at negotiating an IMF programme with Madrid and said it was just a "regular consultation".

© 2010 AFP

0 Comments To This Article